A Kohl’s store in San Rafael, California.
Kohl’s is finalizing talks to sell its business to Franchise Group, owners of The Vitamin Shoppe, two people familiar with the matter told CNBC on Thursday.
The people asked not to be known because a decision by Kohl’s was not publicly announced.
Kohl’s and Franchise Group officials did not immediately respond to CNBC’s requests for comment.
Kohl’s decision comes at a time when its stock price is plummeting and sales are declining. It has been pressured for months by activist investors to seek a sale and shake up the business with a new roster of board members. It was not immediately clear which path Kohl’s would take next.
Funding such a deal has also become more difficult due to volatility in stock markets and the broader economy as the Federal Reserve hikes interest rates to counter rising inflation. The Walgreens Boots Alliance scrapped its plan to sell its British pharmacy chain Boots earlier this week, saying that due to the turmoil in global financial markets, no third party was able to make an adequate offer.
The franchise group had considered lowering its offer for Kohl’s from about $60 a share to closer to $50 a share, CNBC reported last week, citing a person familiar with the matter. The shift in thinking came as the outlook for the retail industry grew increasingly bleak, the person said, as fears of a recession mounted.
The franchise group proposed a $60-per-share bid in early June to acquire Kohl’s, valued at about $8 billion. The two companies then entered an exclusive three-week window in which to consolidate all due diligence and final financing agreements. That started last weekend.
Kohl’s shares closed at $35.69 on Thursday. At one point during the day, the stock hit a 52-week low of $34.33. Kohl’s ended the day with a market valuation of about $4.6 billion, and its shares are down about 28% so far this year.
Earlier this year, Kohl’s received an offer of $64 per share from Acacia Research, which is backed by Starboard, but felt the offer was too low.
Activist firm Macellum Advisors has been urging Kohl’s to consider selling it or other strategic alternatives since January. Macellum also called for Kohl’s to revise its roster of directors, arguing that the retailer, under Chief Executive Officer Michelle Gass, has underperformed its peers in recent years.
Macellum did not immediately respond to a request for comment.
In mid-May, however, Kohl’s shareholders voted to re-elect the company’s current 13 board members, overturning Macellum’s proposal.
The outlook for the retail industry has deteriorated in recent weeks as consumers scale back spending on certain discretionary categories such as housewares and clothing amid inflation and the threat of an economic slowdown.
High-end furniture chain RH lowered its sales forecast for fiscal 2022 on Wednesday, expecting weaker consumer demand for its products in the second half of the year. Bed Bath & Beyond saw sales slump in its most recent quarter and fired its CEO.
Businesses are also seeing inventories piling up as shipments of goods arrive later than planned due to supply chain issues. Big-box retailer Target warned investors in early June that its profits will fall in the near term as it scales back unwanted items, cancels orders and takes aggressive steps to ditch excess inventory.
Kohl’s revenue for the three-month period ended April 30 fell to $3.72 billion from $3.89 billion in 2021. When it released those numbers in mid-May, the retailer also lowered its full-year profit and sales guidance, further clouding the picture for a potential deal.